US Treasury Secretary Yellen: China’s Economic Slowdown May Impact Global Economy, But Not US Recession
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US Treasury Secretary Janet Yellen has stated that a slowdown in China’s economic growth could potentially have ripple effects across the global economy. However, she remains optimistic that this will not lead to a recession in the United States.
Speaking during her visit to India for the G20 Finance Ministers Meeting, Secretary Yellen highlighted the dependence of many countries, particularly in Asia, on China’s robust growth to fuel their own economic expansion.
Addressing concerns about China’s economic recovery, Secretary Yellen mentioned that while the country has started reopening and resuming economic activities, consumer spending appears relatively weak, indicating a focus on rebuilding savings rather than immediate consumption.
On the same day as Secretary Yellen’s remarks, China released its second-quarter gross domestic product (GDP) figures, revealing a year-on-year growth rate of 6.3 percent. While this is lower than market expectations of 7.3 percent, it reflects the country’s transition into a post-pandemic era, showing signs of recovery albeit at a slower pace than initially projected. Global investment banks, including JP Morgan, Citigroup, and Morgan Stanley, have subsequently lowered their growth forecasts for China.
Secretary Yellen acknowledged the potential negative effects of China’s economic slowdown on the United States. However, she emphasized that despite a slowdown in US growth, the labor market remains fairly robust, and she does not anticipate a recession in the United States. She further expressed confidence that the US economy is on a “good path” towards lowering inflation without significantly weakening the labor market.
During her earlier visit to China, Secretary Yellen addressed concerns raised by Chinese officials regarding high tariffs imposed by the previous administration. However, she deemed it premature to discuss lifting these tariffs, citing fundamental concerns over unfair trade practices, particularly in terms of intellectual property rights and technology transfer.
Secretary Yellen clarified that public high-tech regulations are aimed at addressing national security and human rights concerns, rather than a means of mutual retaliation. She also indicated that the Biden administration is likely to issue an executive order preventing American companies from investing in China’s advanced technology sector. Nevertheless, she assured that the scope of this measure would be narrow, targeting specific areas such as semiconductor, quantum computing, and artificial intelligence, and would not broadly affect US companies’ investment in China. Secretary Yellen further asserted that the measure will not significantly impact the Chinese investment environment.
Following Secretary Yellen’s comments, the New York stock market initially experienced a decline due to weak Chinese economic indicators but ended the day on a positive note. Investors reacted to the assurance that the US economy is on track and expectations that the Federal Reserve will conclude the cycle of interest rate hikes by the end of the month.
US Treasury Secretary Janet Yellen said a slowdown in China’s economic growth could have ripple effects across the global economy, but will not trigger a recession in the US.
US Treasury Secretary Janet Yellen (left) shakes hands with Chinese Premier Li Chang. (Photo = Treasury Secretary Janiel Yellen’s Tweet)
Minister Yellen, who is visiting India to attend the G20 Finance Ministers Meeting, said on the 17th (local time) <블룸버그TV>“Many countries, especially Asian countries, rely on China’s strong growth to fuel their own economic growth,” he said.
In this regard, Minister Yellen diagnosed that although China has begun to reopen (resuming economic activity), “consumer spending appeared relatively weak,” and “consumers appear to be focused on rebuilding their savings.”
On the same day, China announced that its second-quarter gross domestic product (GDP) rose 6.3 percent year-on-year, well below market expectations of 7.3 percent. China’s transition to ‘With Corona’ this year and the economy is showing signs of recovery, but it seems slower than expected. As a result, major global investment banks have all lowered their forecasts for China’s growth. JP Morgan and Citigroup cut their forecast for China’s GDP growth from an initial 5.5% to 5%, and Morgan Stanley cut from 5.7% to 5%.
“The slowdown in China’s economic growth could also have some negative effects on the United States,” Yellen said. “Growth in the United States has slowed, but our labor market remains fairly robust,” he said. “We do not expect a recession in the United States.” He further said that the US economy is on a “good path” to lower inflation without significantly weakening the labor market.
During a visit to China earlier this month, Yellen stressed that although Chinese officials had raised serious concerns about the high tariffs imposed on China by the former administration of Donald Trump, it was too early to discuss their lifting. “We imposed tariffs on China because of fundamental concerns about unfair trade practices, particularly intellectual property (IP) and technology transfer,” he said.
Yellen stressed that the public high-tech regulation was “not for mutual retaliation” and was focused on addressing national security and human rights concerns.
In addition, he said the Joe Biden administration is likely to sign an executive order preventing American companies from investing in China’s advanced technology. However, he said the measure would only target the semiconductor, quantum computing and artificial intelligence (AI) sectors, and that it would “contain very narrowly-scoped bans and would not be broad controls affecting on the investment of US companies in China.” he explained. He also argued that the measure would not have a significant impact on the Chinese investment environment.
On this day, the New York stock market began a decline due to weak Chinese economic indicators, but ended higher on expectations that the economy would land softly after Minister Yellen’s comments and that the US would States will end the cycle of raising interest rates at the end of this month.
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